Archive forJune, 2014

In its annual report, the Bank for International Settlements (BIS) urged central banks to start normalising interest rates. The central banks face the risk of normalising too late and too gradually, according to BIS. Low rates have led to a sharp growth in real estate prices and credit in some nations, the agency stated.

Today, survey results by Hometrack indicated UK house prices edged up 0.3% m-o-m in June, registering the slowest pace of growth since January 2014, after rising 0.5% in May. Demand remained unchanged, while the number of property listings increased 1.9% during the month.

Yesterday, Markit, a market research firm, revealed the preliminary reading of the services Purchasing Managers’ Index (PMI) in the US rose to 61.2 in June, a record level since the survey commenced in October 2009, from May’s final reading of 58.1. The expansion was primarily ascribed to an improved level of business activity during the month. Consequently, the composite PMI also reached a record high of 61.1 from 58.4 in May.

Yesterday, the BoE’s Governor Mark Carney stated the labour market had more spare capacity than earlier expected, even as the economy exhibited a strong rebound. He focused on the need to utilise the extra capacity before normalising interest rates.

The quarterly Credit Conditions Survey by the Bank of England (BoE) revealed that mortgage demand in the UK increased in Q2 2014 and lenders expect it to grow further in the next three months. The maximum loan-to-value and loan-to-income ratios rose in the last three months. However, in the next quarter, the loan-to-income ratio is likely to decline, for the first in over two years, due to the new mortgage rules.

China’s preliminary Manufacturing Purchasing Managers’ Index (PMI) increased to 50.8 in June, exceeding expectations of 49.7, from 49.4 in May, as reported by HSBC and Markit. China’s factory activity expanded for the first time in six months. The sub-index of new orders rose to 51.8 in June, primarily driven by strong domestic consumption.

After a meeting with the national security team on the ongoing geopolitical situation in Iraq, US President Barack Obama decided to send around 300 military advisers to Iraq to assist the country’s forces in countering the advance of Sunni insurgents.

The International Monetary Fund (IMF) urged the Irish government to not ease its tough budget plans in light of rising voter support to parties and independents known for their opposition to austerity. The IMF said Ireland should continue with its plans for austerity next year, with tax hikes and spending cuts of up to €2 bn.

During a meeting between Chinese Premier Li Keqiang and UK Prime Minister David Cameron, a two-way trade target of US$100bn was set for the two countries to be achieved by the end of next year. Trade agreements worth US$24bn were signed during the visit. The two leaders also pledged to work together to stimulate growth in both countries.

The International Monetary Fund (IMF) cut its economic growth forecast for the US to 2% for 2014 from 2.8% in April, citing harsh winter and weak international demand for the country’s products. However, the forecast for 2015 remains unchanged at 3% due to the expected growth in job creation. Separately, the IMF urged the Federal Reserve to keep policy rates at near-zero levels for a longer period.

As per data released by Rightmove, the average price of a house in the UK advanced 0.1% m-o-m to £272,275 in June, after recording a 3.6% gain in May. Prices in London were down 0.5% to £589,776, while in Wales, prices increased 0.6% to £178,520. On y-o-y basis, growth in house prices decelerated to 7.7% in June from 8.9% in May.

As per a report released by Acadata, average house prices in the UK rose by £21,000 from last year to £266,000 in June, recording the 11th consecutive month of gain. Excluding London, prices in England and Wales rose 6.3% y-o-y to £221,212, the agency noted.

Today, the latest survey by the Royal Institution of Chartered Surveyors (RICS) revealed that the gauge of UK house prices rose to 57% in May from 55% in April. The actual reading was well above the market estimate of 52%. As per the survey, house prices are expected to increase 3.6% over the next 12 months compared with April’s projection of 3.9% rise.

In its World Economic Prospects report, the World Bank lowered its projection for global economic growth for 2014. The bank estimates the world economy to expand 2.8% in 2014 vis-à-vis 3.2% earlier. The estimate for the US is slashed to 2.1% from 2.8%, while Brazil, Russia, India and China also witnessed downgrades. Meanwhile, growth estimates for 2015 and 2016 remain unchanged at 3.4% and 3.5%, respectively.

Today, data released by the British Retail Consortium (BRC) showed that growth in retail sales in the UK eased to 2% y-o-y in May from 5.7% in April. Sales in April were supported by the timing of the Easter holidays. On like-for-like (LFL) basis, sales edged up 0.5% in May, after rising 4.2% in April, lower than the expectation of 1.6%. For the three months ended May 2014, total and LFL sales were up 2.3% and 0.8%, respectively.

According to the latest estimate from the Cabinet Office released today, Japan’s GDP grew 1.6% q-o-q in Q1 2014, better than the initially estimated 1.5%, after expanding 0.1% in the previous quarter. These figures marked the biggest increase since Q3 2011. On annualised basis, GDP growth was revised to 6.7% from 5.9%.

In a move designed to promote fairness among investors, the US Securities and Exchange Commission (SEC) Chair, Mary Jo White, announced the organization would soon establish stricter rules for high-frequency trading (HFT) and dark pools. HFT uses algorithms for buying and selling stocks in huge volumes within fractions of a second, while dark pools allow investors to execute trades anonymously and only make trading data available upon completion of the trade.

Richard Fisher, President of the Dallas Federal Reserve, said he favours closure of the US central bank’s massive bond-buying programme in October 2014. Fisher has long criticized the US Fed’s quantitative easing programme, saying it has lasted too long and is distorting financial markets due to encouraged risk-taking.

The European Commission has urged the UK government to tax expensive homes at a higher rate. The move would help expand the tax base and aid deficit reduction for the country. The European Commission said the UK should also consider modifying the ‘Help to Buy’ scheme.